The aim is to validate the third generation Thyrotropin receptor antibody (TRAb) assay for predicting neonatal thyroid dysfunction and adverse pregnancy outcomes in pregnant women with Graves' disease. This prospective cohort study was conducted in TRAb positive pregnant women with Graves' disease and their off springs. The primary outcome was to assess different forms of neonatal thyroid dysfunction in relation to maternal and neonatal TRAb levels. The secondary outcome was to predict adverse pregnancy outcomes by using maternal TRAb levels. Serum T3, FT4, TSH, TRAb levels were measured using electrochemiluminescence immunoassay. 51 pregnant women were included. Five women had adverse pregnancy outcomes, TRAb levels of > 19.06 IU/L (10.9 times the upper limit of normal (ULN)) predicted adverse pregnancy outcomes with 100% sensitivity and 93.5% specificity. Among the 46 successful live births, 13 (28.3%) had neonatal thyroid dysfunction. Out of 13 neonates, 7 (32%) had neonatal thyrotoxicosis, 4 (18%) had primary hypothyroidism, and 2 (9%) had central hypothyroidism. Third trimester maternal TRAb levels of > 7.99 IU/L (4.6 times the ULN)and day three neonatal TRAb levels of > 5.03 IU/L (2.9 times the ULN), predicted the neonatal thyrotoxicosis with 100% sensitivity and 97.4% specificity. Very high maternal third generation TRAb levels strongly predicted the adverse pregnancy outcomes and neonatal thyroid dysfunction in pregnant women with Graves' disease. Neonatal thyroid function test along with the TRAb levels strongly correlated with different forms of neonatal thyroid dysfunction and is very useful in avoiding inadvertent treatment to neonates.